Natural Resources Committee on Feb. 17th, 2011

[Roger Pomerleau, Bloc, Drummond, QC]

Thank you, Mr. Chair.

Thanks to both of you for coming so far to be here today. The weather may be better back home.

Mr. Reid, in your presentation, you talked about the role of the federal government. You said the project was “truly a nation-building project, determined to be in the public interest”. There is an implicit recognition in that statement that when something benefits the nation, no matter where in Canada—and gas development is very profitable—it inevitably benefits everyone.

If I was a Canadian in Toronto, I would say I agree completely, that is absolutely true, but I am not. I come from Quebec, and there are two nations in Canada. Even Mr. Harper recognized not just a nation, but the nations.

As a nation, we see things very differently. Why? I will give you an example. You mentioned funding that had been given to other major projects in the past, including the St. Lawrence Seaway, which was built mostly in Ontario with Quebec supplying 30% of the funding, the Hibernia development, which was built in Newfoundland Labrador with Quebec supplying 25% of the funding, and the TransCanada Pipeline, which is probably out west. But you did not mention the CANDU reactors at Atomic Energy of Canada Limited, which are also located mostly in Ontario.

In Quebec, we have an energy supplier called Hydro-Québec, but we did not get a penny from the Canadian government. As a nation, we feel as though we are paying 25% to 30% of everyone's else bill, while we receive payments under the equalization program. So we do not really think it benefits everyone.

[Denis Coderre, Liberal, Bourassa, QC]

I just wanted to make sure that everyone here understands that there are also aboriginal nations.

My colleague talked about two nations. I won't get into a history lesson, but he needs to correct himself, especially since we are talking about a pipeline in partnership with aboriginal nations.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

That is not a point of order.

[Denis Coderre, Liberal, Bourassa, QC]

No, but it is worth mentioning.

[The Chair, Conservative, Leon Benoit]

Monsieur Coderre, I think you're engaging in debate here.

Monsieur Pomerleau, did you have a question at the end of your comment?

[Roger Pomerleau, Bloc, Drummond, QC]

The question was this: do you understand that it is very possible to see things in another way than what you present?

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Ha, ha! You slipped up. You spoke in English.

[The Chair, Conservative, Leon Benoit]

Do you have a response, Mr. Reid?

[Robert Reid]

Yes, I understand.

The people in the Northwest Territories share your sense that they have not had their fair share. This would be an opportunity to really develop a project that has benefits not only for the aboriginals in the Northwest Territories but for people widely spread across Canada. It provides an environmentally preferable fuel, the fuel we need, in a timely manner, and it brings economic benefits and jobs for all of Canada.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Pomerleau.

Thank you very much, gentlemen, for coming today.

Your presentations were very enlightening, and your answers to questions were very helpful to our study. Thank you very much.

We will suspend now for a minute or two as we change witnesses. Then we will come back to the second panel.

[The Chair, Conservative, Leon Benoit]

We resume the meeting now with our second panel for today.

From the Alberta Chamber of Resources, we have Brad Anderson, executive director, and Larry Staples, project manager of the task force on resource development and the economy. From the Town of Bay Bulls, we have Harold Mullowney, mayor, and Ted Lomond, executive director, Newfoundland and Labrador Regional Economic Development Association.

Welcome, gentlemen. Thank you very much for coming today.

We will start the presentations in the order listed on the agenda.

From the Alberta Chamber of Resources, we have Mr. Brad Anderson and Mr. Staples. You have up to seven minutes. Go ahead, please.

[Larry Staples, Project Manager, Task Force on Resource Development and the Economy, Alberta Chamber of Resources]

Mr. Chairman, we appreciate the opportunity to speak with the standing committee today and to provide the perspective of the Alberta Chamber of Resources.

The Alberta Chamber of Resources is 75 years old. We had a great birthday party last Friday night in Edmonton, with 700 of our closest friends at our annual banquet and awards evening. We have about 200 member companies from all sectors of resource development. We think that cross-sector membership gives us a unique, broad, strategic, and balanced perspective.

Our mission is orderly and responsible development. We think we've had an impact over the years on both corporate strategy and public policy. That impact has come through reports such as the few examples I have to show you today, including, the National Task Force on Oil Sands Strategies; the Oil Sands Technology Roadmap; “Learning From Experience: Aboriginal Programs in the Resource Industries”, which is a best practices guide for relationships between resource companies and aboriginal communities; and “Caring for the Land”, which is a summary of rehabilitation for surface mining operations and some success stories in terms of renewal and rehabilitation of surface mining.

The latest report of the task force on resource development and the economy will be issued in a few weeks. That task force was commissioned by the board of directors of the Alberta Chamber of Resources to look at the historical impact and the potential future impact of resource development on the economy and to formulate some recommendations that would invite governments and industry to work together to optimize that in the future.

The report was developed with very broad input from nine sector committees and with economic modelling by Dr. Robert Mansell and his team at the School of Public Policy at the University of Calgary. They used the Statistics Canada provincial input-output model to assess both the direct impact of economic activity within the resource sectors and the forward and backward linkages that give rise to the indirect effects in supply sectors and service sectors such as engineering and accounting. We think this more thorough understanding of the total effect, both indirect and direct, will be one of the major contributions of our report.

The report is in the process of being printed. We'll be pleased to send you a copy in early March as soon as it is available.

I'd like to highlight four of the broad conclusions from the task force report.

First, the resource sectors are key drivers that propel the whole economy. Nationally, one-quarter of all business profits and one-third of business investments arise in the resource sectors. Over half of the value of shares traded on the Toronto Stock Exchange are resource shares. The resource sectors are the largest net contributors to Canada's positive balance of trade. When we add up all these direct and indirect factors, we see that 20% of Canada's gross national product and over 60% of Alberta's gross domestic product arise from resource development activity.

Second, we have two wonderful competitive advantages in Canada: the resources in and on the ground, and the thriving knowledge economy, driven by resource development, that exists above the ground.

Some of that knowledge economy is resident within the resource development companies, some within the regulators and government departments and research laboratories that are connected with resources. To a large extent, that knowledge economy is in the supply and service sectors.

I'd like to point out that this knowledge is globally competitive, and there is a large export component to that knowledge economy.

Third, we should remind ourselves that in Canada we have a good track record in terms of responsible development. We have knowledgeable regulators, who set high standards and enforce them. We have resource development companies that take their safety, environmental, and community responsibilities seriously. They walk the talk.

Finally, as we look at the future of resource development, we see that we have ample resources. In the energy sector we have coal and bitumen. The production horizon of those resources is measured in centuries. Even for conventional oil and gas, as we've been hearing about, production horizons have been rising in the last few years. Beyond the energy resources, we have a big basket of other mineral resources. We have renewable forests. When we put all that together, we see that we have a large and diversified portfolio.

As we talked with our sector leads, we asked them to describe low scenarios and high scenarios for future development in their sectors. Dr. Mansell and his economic modelling team put all this together so that we could determine the size of the prize if we can come up with smart corporate strategies and wise government policies that steer us away from the risks of the low scenario and toward the rewards of the high scenario.

That prize, that difference between the low and the high curve, we've estimated in Alberta as $700 billion worth of incremental GDP over the next 10 years, as well as four million person-years of incremental employment over the next 10 years, so industry, governments, and society generally have high motivation to pursue orderly and responsible development.

In conclusion, I would encourage the committee, when the report arrives in the next few weeks, to please read it and please understand the economic importance of these sectors and the tremendous effect the direct and the indirect effects have on the overall Canadian economy. Please look at the recommendations to determine how the federal government could work with the provincial governments and industry to pursue a common vision of orderly and responsible development.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Staples, for your presentation.

From the Town of Bay Bulls, we go to Mayor Mullowney. Are you going to make the presentation?

[Harold Mullowney, Mayor, Town of Bay Bulls]

Yes.

[The Chair, Conservative, Leon Benoit]

Go ahead, please, for up to seven minutes. Welcome.

[Harold Mullowney]

Mr. Chair, committee members, thank you for the opportunity to speak with you today about the energy security of Canada, and in particular the regional economic impacts of oil and gas development.

The maximization of economic benefits from this non-renewable resource is of considerable interest to the numerous community-based organizations and countless volunteers who I am representing here today.

While oil and gas development and production have infused the province of Newfoundland and Labrador with financial resources and a confidence beyond any in our history, it must be noted that not all regions of the province have shared equally in this prosperity.

[The Chair, Conservative, Leon Benoit]

Excuse me, Mayor. The interpreters are having a little bit of trouble keeping up. Perhaps you could slow down a little bit. I know you have a limited amount of time, but they can't keep up. Please just slow it down a little bit. Thank you

[Harold Mullowney]

Regional and economic development groups, such as those I represent, are working to bring local capabilities, knowledge, skills, and initiative to bear to ensure that the province capitalizes fully on this finite opportunity. We must nevertheless not lose sight of how a strong Newfoundland and Labrador contributes to a strong and vibrant nation of Canada.

Let me be clear: we do not support development at any cost. As the mayor of a small coastal community, let me first say that our natural resources and environment must be protected. Others may have already started to forget the disaster in the Gulf of Mexico, but we have not. Industries such as fish harvesting, aquaculture, tourism, and nutraceuticals will long outlast the oil and gas industry. The continuation of these sectors is squarely dependent upon our stewardship.

As the brother of one of those lost in the Cougar 491 tragedy of March 12, 2009, let me make a second point: it is a price no family should have to pay. We believe that we must develop our offshore resources in the safest manner possible.

There are many things the federal government can do to help Canadians benefit fully from the offshore oil and gas industry. The oil and gas industry directly employs over 4,500 people in our region of Atlantic Canada and generates revenues of almost $7 billion annually. The tax royalties resulting from the oil and gas industry, combined with those accrued in related spinoffs, are massive.

The cumulative benefits have not only enabled the province to end years of deficit financing but can now also be felt on the national balance sheet. The federal government must work to promote the technological advancements required to prolong the life of existing discoveries while it creates an exploration-friendly environment. This will ensure that the life of the industry is maximized to the fullest extent possible.

It is important to remember that while there have been 2.84 billion barrels of oil discovered in Newfoundland and Labrador, a potential six billion barrels remain to be discovered. In Nova Scotia waters, the CNSOPB projects another 2.6 billion barrels of undiscovered oil. Still, exploration in the region lags.

In the North Sea area, approximately 4,000 exploration wells have been drilled, compared to 140 wells in Newfoundland and Labrador, which has an area four times the size.

The federal government must also work with organizations such as NLREDA and the Newfoundland and Labrador Oil and Gas Industries Association, NOIA, to facilitate the participation of local business in the sector in the provision of products and services for the petroleum industry. The industry is one that is highly technical and regulated. It can be intimidating and it can be a challenge to enter. We must remove the barriers so that those closest to the resource can benefit.

The federal government must also engage with the Government of Newfoundland and Labrador and with industry to capitalize on exploration off the cost of Greenland. Greenland lacks the infrastructure and industry base required to adequately supply development of the sector in that region. We believe that our capabilities, our geographic location, and our position put us in a very good position to pursue a mutually beneficial partnership.

We must also leverage our skills and infrastructure to exploit opportunities for export all over the world. Companies from Newfoundland and Labrador have already demonstrated success in this regard. Together community, government, industry, and academia can grow exports through network and cluster development.

Natural gas holds tremendous potential for Newfoundland and Labrador, which has proven natural gas reserves of over 10 trillion cubic feet and an estimated 60 trillion cubic feet waiting to be discovered. The federal government must work with industry and academia to marry existing technologies with harsh-environment expertise to enable the development of natural gas production in that province. It is important to note that from an environmental perspective, natural gas produces far lower carbon emissions than coal.

Knowledge mobilization has always been challenged by large industrial projects, but it is by no means impossible. The project management, engineering, safety, and harsh-environment skills engaged in this sector are a potential source of competitive advantage, where they are not only transferred, but are embraced as part of the business culture. The federal and provincial governments, working with academia, industry, and development organizations, must develop a knowledge mobilization plan that spans the 30-plus years of coming oil and gas activity.

Increasingly we recognize the need for government and industry to work with communities to build sustainable regions that offer not only employment but also equality of life in a rural setting. Funding earmarked for research, development, and training must be invested so as to contribute to maintaining a vibrant culture and to enhancing the opportunities outside oil and gas so that regions will continue to flourish long after the royalties have begun to disappear.

The social dividend of the oil and gas industry is something that is often overlooked. I've already alluded to the pride and confidence that come with prosperity. This is reflected in the growth of the province's artistic, heritage, and cultural sectors. In the province there has also been a sharp decline in the number of families torn apart as family members were forced to move away to find employment elsewhere. In our efforts to develop the industry further, we must never lose sight of the fact that these resources belong to the people and must be developed for the good of the people--all of the people.

The oil and gas industry has led to significant economic benefits, including direct employment, tax revenues, infrastructure improvements, skills training, major capital project spending, and supply opportunities. These benefits, however, are far short of their true potential. As we go forward we must not lose sight of those communities not sharing in the prosperity that the industry brings, nor must we lose sight of our environmental responsibilities or of our duty of care for those who put themselves in harm's way on behalf of all of us.

Thank you for this opportunity. I would like to end by saying that regular engagement with industry and community-based development organizations, such as the Newfoundland and Labrador Regional Economic Development Association, is critical if we are to maximize the benefits from our oil and gas resource as we move forward.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mayor, for your presentation.

We'll go now directly to questions and comments.

Go ahead, Mr. Andrews, for up to seven minutes.

[Scott Andrews, Liberal, Avalon, NL]

Thank you very much, Mr. Chair, and thank you to the witnesses for coming today.

I'm going to start my questions with you, Mr. Staples.

In your presentation you talked about provincial and federal governments and the high standards of regulation. We've heard from some witnesses that there's a lot of duplication in regulations.

Do you see that this is the case in your area? If so, is there something that this committee should address to reduce the amount of duplication in regulations?

[Larry Staples]

It is certainly something we've seen. Luckily, there is action well in progress in the form of a regulatory review process in Alberta, where just in the past few weeks they have announced some streamlining at the provincial level to eliminate duplication without reducing standards. As well, there is a federal-provincial regulatory streamlining initiative under way. I can't recall the name of it exactly, but we had one of the associate deputy ministers from Natural Resources Canada actually come to speak to us at our environmental forum last year. It sounds as though progress is being made in resolving that problem.

[Scott Andrews, Liberal, Avalon, NL]

Thank you very much.

This question's for you, Mayor.

You mentioned oil and gas benefits stretching across the entire island, and how not all areas benefit from these.

Do you want to elaborate a little further on how far the benefits from oil and gas stretch across the Island of Newfoundland, and how not all areas are seeing this economic impact?

[Harold Mullowney]

Most of the development and most of the spinoff benefits so far have been centred on the Avalon Peninsula, and the closer you get to the city of St. John's, the more you see.

I represent, as a mayor, a small town of 1,000 people. It has been 1,000 people for many years. We have a 500-year history, but in the last decade we've built an offshore oil supply base in that community. We have a deepwater port and, yes, we have received benefits. We have seen property values pretty well triple in the last 10 years. We have seen numerous new housing starts. We have seen numerous new subdivisions begin.

We are struggling with the fact that infrastructure and communications and the proper material to support all this is not always there. We're often reactive as opposed to proactive, but the communities farther removed from the community of Bay Bulls or from some of the oil and gas ports often do not share to the same degree.

I would also say we have created a very mobile workforce in Newfoundland. Many of our young people have travelled all over the world, and many of them have worked in the oil and gas industry. In recent years they are coming back home and are building their communities. Still, they are trying to centre themselves closer to the bigger communities.

I am fortunate that my community of 1,000 people is only a 15- or 20-minute drive from the capital city of St. John's, but we're also fortunate in that we have a very good deepwater navigation-free port that can service the Grand Banks. St. John's, as a harbour and a service port, is pretty well full, so the harbours that exist nearby will be filled up and move out, and you'll continue to see development, but that development needs infrastructure spending. I always fear that we'll miss the opportunity because we're always being reactive; the opportunity comes and goes and is lost, because we don't have the infrastructure to avail ourselves of it.

I don't know if that answers your question.

[Scott Andrews, Liberal, Avalon, NL]

Yes. Your community does a great job of balancing the oil and gas, the fishing industry, and the tourism industry, which are all vital to the survival of Newfoundland and Labrador.

You briefly talked about exploration. Let's dig into that a little bit. Exploration off the east coast has been decreasing. You said we need to prolong exploration and that government has a role in encouraging exploration.

Can you give us some examples of how, as a federal government, we could encourage more exploration off the east coast?

[Harold Mullowney]

Any government really has the task of creating the environment in which things can happen, so when it comes to regulations and such, that's the role I see primarily for government. Of course, helping financially doesn't hurt either, but by and large, I believe government is in place to create the environment whereby things can move forward without trying to slow them down too much.